The Bank Scam and its Results

The Bank Scam

Most people don’t realize how money is created in western economies, and if they are told have difficulty believing it.  Here’s a short version:

Since the founding of the Bank of England (a private corporation) money has been created primarily by banks, not by governments.  When you take out a loan, mortgage or other credit instrument, only a fraction of what the bank gives you comes from people saving at the bank, the rest is simply created, with limits set by entities like the Federal Reserve.  Since banks charge interest on all of that created money, paying it back becomes a problem, because if everybody paid it back that could, there would be no money left in circulation and yet a huge debt still outstanding.  One of the first results of this was the British Empire, which was driven by the need to steal from outside the British economy in order to keep that economy alive.  That simultaneously created the Third World – the economies being stolen from.

Another result was the onerous taxation required to keep a government running in a situation where more money is always removed than added.  That led to things like the American Revolution, and the constitution of the U.S. specifically bars private corporations from issuing money because men like Jefferson understood that it was a scam.  However since Lincoln that injunction has been simply ignored, and now the U.S. is the leading enforcer of the bank scam.

The main ‘release valve’ that keeps such a system from simply imploding is bankruptcy.  Bankruptcy isn’t just an unfortunate necessity to mitigate the risk inherent in trying to improve things, it’s a necessary and inevitable result of the way money is created.  Other release valves include ‘lending’ goods to other countries and then writing off the loan, which is one of the main release valves Canada uses, and one of the main reasons Canadians continue to get wealthier per capita than Americans each year.  Paying off war debts with goods worked for decades as the release valve that kept the German and Japanese economies going strong, stronger than those the goods were paid to.  While China is ‘participating’ in the western economic scam, they are doing so from a vantage point of not believing in the system, and as a result are exploiting it to the fullest.  The last thing the Chinese would ever want to do is demand payment for the goods ‘lent’ to other countries, since that would wreak havoc on their economy.,

The IPO documentation from the Bank of England states that ‘the public will be too stupid to realize that they are being swindled’.  Apparently they were right, since the swindle not only has not been stopped, it has spread across the globe in the intervening centuries.

The most idiotic move in the U.S. has been the Republican change to not allow student debt to be included in a bankruptcy.  The result is over a trillion dollars of unpaid debt, with more than a third already in default, and no way to simply write it off and move on.  The current Republican policy to attempt to re-institute debtors’ prisons would make a difficult situation intolerable (those in prison don’t contribute much to either production or consumption in the economy, but they do cost a huge amount per capita).

Since money can only be considered ‘in circulation’ if it is actively in circulation, i.e. being spent, the wealthy can only ‘have’ wealth if others need to borrow it and spend it for them each year.  In turn this requires sufficient growth to cover last year’s discrepancy between money actually created and money owed.  The root cause of inflation is that most years the growth in the economy is not sufficient to cover generated interest, not workers demands for higher pay, nor even the growth in the proportion the wealthy keep.  Of course, given that inflation will continue whether or not workers demand more pay, eventually they get slightly more, but that slightly more only increases the rate of inflation, which adds to the problem.  Without the taxation on the wealthy that is spent on social programs, the bankruptcy rate among the less fortunate would eventually bankrupt everybody.  Ironically, it would even take the banking system with it.  Economic growth, contrary to popular belief, does not result in greater real wealth, it just increases the resources utilized, and as a result is not sustainable – ‘sustainable growth’ is an oxymoron.  Since that growth itself is dependent on increasing consumption, it is dependent in an economy with wide income differentials on debt straddling the gap between those with no money to consume, and those with no need to consume more.  The interest on that debt, though, causes the gap to increase, and the necessary and inevitable result is a significant amount of defaulted debt and bankruptcy.  Without debtors not paying the economy would collapse, and the resulting anarchy would likely prove fatal precisely to wealthy themselves.

The only thing saving the wealthy from being torn apart and fed to the dogs is precisely the taxation, government spending and defaulting debtors they are so intent on preventing.


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